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Ragan v. Ragan.

2021 COA 75. No. 20CA0038. Employment Law—Employee Retirement Income Security Act—Divorce Revocation Statute—Preemption.

May 27, 2021

During Ragan’s marriage to Hudson, Ragan took out several life and accidental death insurance policies through his employer that named Hudson as the beneficiary. The parties divorced, but Ragan did not change the beneficiary designations on the insurance policies. Ragan died and the insurance proceeds were distributed to Hudson. Ragan’s estate sued to recover those proceeds under CRS § 15-11-804(8)(b), alleging that Hudson was not entitled to the insurance benefits. Hudson moved for declaratory relief and to dismiss, arguing that the Employee Retirement Income Security Act (ERISA) preempts the Colorado statute. The district court granted her motions.

On appeal, the estate argued that the district court erred by concluding that ERISA preempts subsection 8(b). ERISA provides that employee benefit plan payments are to be made to a beneficiary designated by a participant. ERISA also provides that is supersedes state laws related to ERISA employee benefit plans.

CRS § 15-11-804(2)(a)(i) (subsection (2)) of Colorado’s divorce revocation statute provides that any beneficiary designation of a then-spouse is automatically revoked upon divorce. CRS § 15-11-804(8)(b) further provides that if the statute is preempted by federal law, a former spouse who received a payment that he or she was not entitled to under the statute is obligated to return that payment or is personally liable for the amount of the payment to the person who would have received it if not preempted.

The estate conceded that ERISA preempts subsection (2) and that the plan administrator properly distributed the insurance proceeds to Hudson, but it argued that under subsection (8)(b) it could recover those proceeds from Hudson. The Court of Appeals recognized that ERISA preemption extends to post-distribution lawsuits and concluded as a matter of first impression that, absent an express waiver of rights to the proceeds, ERISA precludes a lawsuit against a former spouse to recover insurance proceeds that were distributed to him or her as the named beneficiary. Here, Hudson did not waive her rights to the insurance proceeds, and ERISA preempts the estate’s post-distribution claims to recover from Hudson.

Hudson contended that the estate’s appeal was frivolous and requested fees and costs under C.A.R 38(b). However, the estate raised arguably meritorious contentions on an issue of first impression, so the request was denied.

The judgment was affirmed.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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